<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended April 30, 1999
-----------------------------------
Commission file number 1-4372
------------------------------
FOREST CITY ENTERPRISES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Ohio 34-0863886
- ---------------------------------------------- ----------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 Terminal Tower
50 Public Square Cleveland, Ohio 44113
- ---------------------------------------------- ----------------------------------------
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code 216-621-6060
----------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report).
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------ -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 2, 1999
----- ---------------------------
Class A Common Stock, $.33 1/3 par value 19,286,156 shares
Class B Common Stock, $.33 1/3 par value 10,698,096 shares
<PAGE> 2
FOREST CITY ENTERPRISES, INC.
Index
-----
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information:
Item 1. Financial Statements
Forest City Enterprises, Inc. and Subsidiaries
Consolidated Balance Sheets - April 30, 1999
(Unaudited) and January 31, 1999 3
Consolidated Statements of Earnings
(Unaudited) - Three Months
Ended April 30, 1999 and 1998 4
Consolidated Statements of Shareholders' Equity 5
(Unaudited) - Three Months Ended April 30, 1999 and 1998
Consolidated Statements of Cash Flows (Unaudited) - 6 - 7
Three Months Ended April 30, 1999 and 1998
Notes to Consolidated Financial Statements
(Unaudited) 8 - 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 - 23
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 24 - 25
Part II. Other Information
Item 1. Legal Proceedings 26
Item 6. Exhibits and Reports on Form 8-K 26 - 34
Signatures 35
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item I. Financial Statements
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 30, 1999 January 31, 1999
------------------ ------------------
(Unaudited)
ASSETS (dollars in thousands, except per share data)
<S> <C> <C>
Real Estate
Completed rental properties $ 2,696,276 $ 2,625,589
Projects under development 408,998 412,072
Land held for development or sale 61,845 49,837
------------------ ------------------
3,167,119 3,087,498
Less accumulated depreciation (508,467) (491,293)
------------------ ------------------
Total Real Estate 2,658,652 2,596,205
Cash and equivalents 65,264 78,629
Notes and accounts receivable, net 208,729 229,714
Inventories 56,685 47,299
Investments in and advances to affiliates 316,097 301,735
Other assets 183,735 183,528
------------------ ------------------
$ 3,489,162 $ 3,437,110
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage debt, nonrecourse $ 2,225,074 $ 2,173,872
Accounts payable and accrued expenses 376,984 398,499
Notes payable 41,985 43,929
Long-term debt 117,000 105,000
8.5% Senior notes 200,000 200,000
Deferred income taxes 153,865 150,150
Deferred profit 33,426 33,552
------------------ ------------------
Total Liabilities 3,148,334 3,105,002
------------------ ------------------
SHAREHOLDERS' EQUITY
Preferred stock - convertible, without par value;
5,000,000 shares authorized; no shares issued. - -
Common stock - $.33 1/3 par value
Class A, 96,000,000 shares authorized, 19,907,256
and 19,904,556 shares issued, 19,285,656 and 19,281,606
outstanding, respectively. 6,637 6,636
Class B, convertible, 36,000,000 shares authorized, 10,976,696
and 10,979,396 shares issued, 10,698,596 and 10,701,296
outstanding, respectively. 3,660 3,661
------------------ ------------------
10,297 10,297
Additional paid-in capital 114,273 114,270
Retained earnings 223,276 218,967
------------------ ------------------
347,846 343,534
Less treasury stock, at cost; 621,600 Class A and 278,100 Class B
shares and 622,950 Class A and 278,100 Class B shares, respectively. (11,408) (11,426)
Accumulated other comprehensive income 4,390 -
------------------ ------------------
Total Shareholders' Equity 340,828 332,108
------------------ ------------------
$ 3,489,162 $ 3,437,110
================== ==================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended April 30,
-------------------------------------------------
1999 1998
--------------------- ---------------------
(dollars in thousands, except per share data)
<S> <C> <C>
REVENUES $ 181,694 $ 148,623
--------------------- ---------------------
Operating expenses 112,890 87,236
Interest expense 39,645 36,747
Depreciation and amortization 19,976 21,428
--------------------- ---------------------
172,511 145,411
--------------------- ---------------------
Gain on disposition of properties - 11,447
--------------------- ---------------------
EARNINGS BEFORE INCOME TAXES 9,183 14,659
--------------------- ---------------------
INCOME TAX EXPENSE
Current 2,590 1,551
Deferred 1,299 4,600
--------------------- ---------------------
3,889 6,151
--------------------- ---------------------
NET EARNINGS BEFORE EXTRAORDINARY GAIN 5,294 8,508
Extraordinary gain, net of tax 214 -
--------------------- ---------------------
NET EARNINGS $ 5,508 $ 8,508
===================== =====================
BASIC AND DILUTED EARNINGS PER COMMON SHARE
Net earnings before extraordinary gain, net of tax $ 0.17 $ 0.28
Extraordinary gain, net of tax 0.01 -
--------------------- ---------------------
NET EARNINGS $ 0.18 $ 0.28
===================== =====================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
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<CAPTION>
Common Stock
-------------------------------------------------------------
Class A Class B
Comprehensive -------------------------------------------------------------
Income Shares Amount Shares Amount
--------------- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(in thousands, except per share data)
QUARTER ENDED APRIL 30, 1999
----------------------------
Balances at January 31, 1999 19,905 $6,636 10,979 $3,661
Comprehensive income
Net earnings $5,508
Other comprehensive income, net of tax
Unrealized gain on securities 4,390
---------------
Total comprehensive income $9,898
===============
Dividends: $.04 per share
Conversion of Class B shares
to Class A shares 2 1 (2) (1)
Sale of treasury stock
-------------------------------------------------------------
BALANCES AT APRIL 30, 1999 19,907 $6,637 10,977 $3,660
=============================================================
QUARTER ENDED APRIL 30, 1998
----------------------------
Balances at January 31, 1998, as restated
for a two-for-one stock split effective
July 16, 1998 19,813 $6,606 11,071 $3,691
Comprehensive income
Net earnings $8,508
Other comprehensive income, net of tax
None -
---------------
Total comprehensive income $8,508
===============
Dividends: $.035 per share
Conversion of Class B shares
to Class A shares 25 8 (25) (8)
-------------------------------------------------------------
BALANCES AT APRIL 30, 1998 19,838 $6,614 11,046 $3,683
=============================================================
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Additional Treasury Stock Other Total
Paid-In Retained ---------------------------- Comprehensive Shareholders'
Capital Earnings Shares Amount Income Equity
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(in thousands, except per share data)
QUARTER ENDED APRIL 30, 1999
----------------------------
Balances at January 31, 1999 $114,270 $218,967 901 $ (11,426) $ - $332,108
Comprehensive income
Net earnings 5,508 5,508
Other comprehensive income, net of tax
Unrealized gain on securities 4,390 4,390
Total comprehensive income
Dividends: $.04 per share (1,199) (1,199)
Conversion of Class B shares
to Class A shares -
Sale of treasury stock 3 (1) 18 21
--------------------------------------------------------------------------------------
BALANCES AT APRIL 30, 1999 $114,273 $223,276 900 $ (11,408) $4,390 $340,828
======================================================================================
QUARTER ENDED APRIL 30, 1998
----------------------------
Balances at January 31, 1998, as restated
for a two-for-one stock split effective
July 16, 1998 $114,270 $168,864 905 $ (11,486) $ - $281,945
Comprehensive income
Net earnings 8,508 8,508
Other comprehensive income, net of tax
None - -
Total comprehensive income
Dividends: $.035 per share (1,049) (1,049)
Conversion of Class B shares
to Class A shares -
--------------------------------------------------------------------------------------
BALANCES AT APRIL 30, 1998 $114,270 $176,323 905 $ (11,486) $ - $289,404
======================================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 6
FOREST CITY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended April 30,
-------------------------------------
1999 1998
================= =================
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Rents and other revenues received $ 195,937 $ 145,113
Proceeds from land sales 6,616 4,974
Land development expenditures (15,606) (9,663)
Operating expenditures (121,118) (110,695)
Interest paid (42,399) (38,419)
----------------- -----------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 23,430 (8,690)
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (81,328) (100,564)
Proceeds from disposition of assets - 31,622
Investments in and advances to affiliates (14,362) (35,141)
----------------- -----------------
NET CASH USED IN INVESTING ACTIVITIES (95,690) (104,083)
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of senior notes - 200,000
Payments on senior notes issuance costs - (5,335)
Increase in nonrecourse mortgage and long-term debt 137,633 177,327
Principal payments on nonrecourse mortgage debt on real estate (73,431) (140,014)
Payments on long-term debt - (114,000)
Increase in notes payable 19,744 6,613
Payments on notes payable (21,688) (867)
Change in restricted cash and book overdrafts (1,269) 14,749
Payment of deferred financing costs (916) (5,618)
Sale of treasury stock 21 -
Dividends paid to shareholders (1,199) (1,049)
----------------- -----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 58,895 131,806
----------------- -----------------
NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS (13,365) 19,033
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 78,629 54,854
----------------- -----------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 65,264 $ 73,887
================= =================
</TABLE>
<PAGE> 7
FOREST CITY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended April 30,
------------------------------
1999 1998
============== ===========
(in thousands)
<S> <C> <C>
RECONCILIATION OF NET EARNINGS TO CASH PROVIDED BY OPERATING ACTIVITIES
NET EARNINGS $ 5,508 $ 8,508
Depreciation 17,257 15,225
Amortization 2,719 6,203
Deferred income taxes 843 4,562
Gain on disposition of properties - (11,447)
Extraordinary gain (353) -
Decrease in commercial land included in projects
under development 10,126 -
Increase in land held for development or sale (12,008) (5,194)
Decrease in notes and accounts receivable 20,985 4,105
(Increase) decrease in inventories (9,386) 586
Decrease (increase) in other assets 9,479 (498)
Decrease in accounts payable and accrued expenses (21,614) (30,805)
(Decrease) increase in deferred profit (126) 65
--------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 23,430 $ (8,690)
========= ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 8
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. Extraordinary Item
------------------
The extraordinary gain ($353,000 pre-tax) recorded in the first quarter
represents extinguishment of non-recourse debt related to Plaza at
Robinson Town Centre located in Pittsburgh, Pennsylvania.
B. Dividends
---------
The Board of Directors declared regular quarterly cash dividends on
both Class A and Class B common shares as follows:
<TABLE>
<CAPTION>
Date Date of Payment Amount
Declared Record Date Per Share
-------- ------ ---- ---------
<S> <C> <C> <C>
March 11, 1999 June 1, 1999 June 15, 1999 $.04
June 8, 1999 September 1, 1999 September 15, 1999 $.05
</TABLE>
C. Earnings per Share
------------------
The reconciliation of the numerator and denominator of basic earnings
per share (EPS) with diluted EPS is as follows:
<TABLE>
<CAPTION>
Net Earnings Net Earnings
Before Weighted Average Before
Extraordinary Gain Shares Outstanding Extraordinary Gain
(Numerator) (Denominator) (Per Share)
----------- ------------- -----------
<S> <C> <C> <C>
Basic EPS $ 5,294,000 29,983,626 $0.17
Dilutive effect of
stock options - 178,864 -
------------ ---------- -----
Diluted EPS $ 5,294,000 30,162,490 $0.17
============ ========== =====
</TABLE>
D. Stock Options
-------------
In April 1999, the Compensation Committee of the Board of Directors
granted 372,800 Class A fixed stock options under the 1994 Stock Option
Plan. The options have a term of 10 years, vest over two to four years
and have an exercise price of $22.375.
E. Prior Year Reclassification
---------------------------
Certain prior year figures were reclassified to conform to the current
year presentation.
<PAGE> 9
F. New Accounting Standards
------------------------
Effective February 1, 1999, the Company adopted Statement of Position
98-5, "Reporting on the Costs of Start-Up Activities", which requires
start-up costs and organizational costs be expensed as incurred. The
adoption of this accounting principle had no material effect on
earnings and financial position.
The Financial Accounting Standards Board (FASB) is reevaluating the
required implementation date for SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement requires
recognition of all derivatives as either assets or liabilities and
measurement of those instruments at fair value. The Company will adopt
SFAS 133 on the required implementation date that the FASB will
ultimately decide upon.
G. Segment Information
-------------------
Principal business groups are determined by the type of customer served
or the product sold. The Commercial Group owns, develops, acquires and
operates shopping centers, office buildings and mixed-use projects,
including hotels. The Residential Group develops or acquires and
operates the Company's multi-family properties. Real Estate Groups are
the combined Commercial and Residential Groups. The Land Group owns and
develops raw land into master planned communities and other residential
developments for resale to users principally in Arizona, Colorado,
Florida, Nevada, New York, North Carolina and Ohio. The Lumber Trading
Group operates the Company's lumber wholesaling business. Corporate
includes interest on corporate borrowings and general administrative
expenses.
The Company uses an additional measure, along with net earnings, to
report its operating results. This measure, referred to as Earnings
Before Depreciation, Amortization and Deferred Taxes ("EBDT"), is not a
measure of operating results or cash flows from operations as defined
by generally accepted accounting principles. However, the Company
believes that EBDT provides additional information about its operations
and, along with net earnings, is necessary to understand its operating
results. The Company's view is that EBDT is also an indicator of the
Company's ability to generate cash to meet its funding requirements.
EBDT is defined as net earnings from operations before depreciation,
amortization and deferred taxes on income and excludes provision for
decline in real estate, gain (loss) on disposition of properties and
extraordinary items.
The following tables summarize selected financial data for the
Commercial, Residential, Land and Lumber Trading Groups and Corporate.
All amounts, including footnotes, are presented in thousands.
<PAGE> 10
G. Segment Information (continued).
--------------------------------
<TABLE>
<CAPTION>
-----------------------------------
For the Quarter Ended April 30,
-----------------------------------
Expenditures for Additions
Identifiable Assets to Real Estate
--------------------------------------------------------------------
April 30, 1999 Jan. 31, 1999 1999 1998
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial Group................................................ $2,400,995 $2,330,624 $49,973 $84,353
Residential Group............................................... 734,788 722,160 17,131 15,895
Land Group...................................................... 111,324 100,501 15,464 8,286
Lumber Trading Group............................................ 205,582 218,551 826 491
Corporate....................................................... 36,473 65,274 174 115
-------------------------------------------------------------------
Consolidated............................................... $3,489,162 $3,437,110 $83,568 $109,140
===================================================================
------------------------------------------------------------------------------------------------------
For the Quarter Ended April 30,
------------------------------------------------------------------------------------------------------
Depreciation and
Revenues Interest Expense Amortization Expense
------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998
------------------------------------------------------------------------------------------------------
Commercial Group.............. $107,026 $85,404 $24,055 $22,841 $15,170 $16,800
Residential Group............. 34,277 31,264 6,485 7,100 4,074 3,879
Land Group.................... 5,636 4,952 2,133 2,100 25 129
Lumber Trading Group (1)...... 34,626 26,330 1,102 1,316 485 522
Corporate..................... 129 673 5,870 3,390 222 98
------------------------------------------------------------------------------------------------------
Consolidated............. $181,694 $148,623 $39,645 $36,747 $19,976 $21,428
======================================================================================================
Earnings Before Depreciation,
Earnings Before Amortization and Deferred
Income Taxes (EBIT) (2) Taxes (EBDT)
--------------------------------------------------------------------
1999 1998 1999 1998
--------------------------------------------------------------------
Commercial Group................................................ $11,819 $5,295 $24,458 $20,818
Residential Group............................................... 6,100 4,155 8,864 7,527
Land Group...................................................... (2,375) (1,623) (1,460) (982)
Lumber Trading Group............................................ 2,817 808 1,692 393
Corporate....................................................... (9,178) (5,423) (6,424) (3,161)
Gain on disposition of properties............................... - 11,447 - -
--------------------------------------------------------------------
Consolidated............................................... $9,183 $14,659 27,130 24,595
================================
RECONCILIATION TO NET EARNINGS:
Depreciation and amortization - Real Estate Groups.............................................. (19,244) (20,679)
Deferred taxes - Real Estate Groups............................................................. (2,592) (2,328)
Gain on disposition of properties, net of tax................................................... - 6,920
Extraordinary gain, net of tax.................................................................. 214 -
------------------------------------
Net earnings.................................................................................... $5,508 $8,508
====================================
</TABLE>
(1) The Company recognizes the gross margin on lumber brokerage sales as
Revenues. Sales invoiced for the quarter ended April 30, 1999 and 1998 were
approximately $869,000 and $714,000, respectively.
(2) See Consolidated Statements of Earnings for reconciliation of EBIT to net
earnings.
<PAGE> 11
The enclosed financial statements have been prepared on a basis consistent with
accounting principles applied in the prior periods and reflect all adjustments
which are, in the opinion of management, necessary for a fair presentation of
the results of operations for the periods presented. All such adjustments were
of a normal recurring nature. Results of operations for the three months ended
April 30, 1999 are not necessarily indicative of results of operations which may
be expected for the full year.
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations of Forest City Enterprises, Inc. should be read in
conjunction with the financial statements and the footnotes thereto contained in
the January 31, 1999 annual report ("Form 10-K").
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------
GENERAL
The Company develops, acquires, owns and manages commercial and residential real
estate properties in 21 states and the District of Columbia. The Company owns a
portfolio that is diversified both geographically and by property types and
operates through four principal business groups: Commercial Group, Residential
Group, Land Group and Lumber Trading Group.
The Company uses an additional measure, along with net earnings, to report its
operating results. This measure, referred to as Earnings Before Depreciation,
Amortization and Deferred Taxes ("EBDT"), is not a measure of operating results
or cash flows from operations as defined by generally accepted accounting
principles. However, the Company believes that EBDT provides additional
information about its operations and, along with net earnings, is necessary to
understand its operating results. The Company's view is that EBDT is also an
indicator of the Company's ability to generate cash to meet its funding
requirements. EBDT is defined and discussed in detail under "Results of
Operations - EBDT."
The Company's EBDT for the three months ended April 30, 1999 grew by 10.3% to
$27,130,000, or $.90 per share of common stock, from $24,595,000, or $.82 per
share of common stock for for the first quarter of 1998, diluted and adjusted
for the two-for-one stock split in July 1998. The increase in EBDT is primarily
attributable to the acquisitions or openings of 16 properties during 1998 and
the opening of the 276,000-square-foot Millennium office building in Cambridge,
Massachusetts in February 1999.
<PAGE> 12
RESULTS OF OPERATIONS
The Company reports its results of operations by each of its four principal
business groups as it believes it provides the most meaningful understanding of
the Company's financial performance.
The major components of EBDT are Revenues, Operating Expenses and Interest
Expense, each of which is discussed below. Net Operating Income ("NOI") is
defined as Revenues less Operating Expenses. See the information in the table
entitled "Earnings before Depreciation, Amortization and Deferred Taxes" at the
end of this Management's Discussion and Analysis of Financial Condition and
Results of Operations.
NET OPERATING INCOME FROM REAL ESTATE GROUPS - NOI from the combined Commercial
Group and Residential Group ("Real Estate Groups") for the first quarter of 1999
was $67,703,000 compared to $60,069,000 for the first quarter of 1998, a 12.7%
increase.
COMMERCIAL GROUP
REVENUES - Revenues for the Commercial Group increased $21,622,000, or 25.3%, to
$107,026,000 in the first quarter of 1999 from $85,404,000 in the first quarter
of 1998. This increase is primarily the result of property openings and
acquisitions. During 1998, Forest City acquired the 292-room Sheraton Hotel at
Station Square in Pittsburgh, Pennsylvania and the 324,000-square-foot Fairmont
Plaza office building and adjacent 249,000-square-foot Pavilion retail center in
San Jose, California, which increased revenues over last year by $5,732,000,
$2,979,000 and $664,000, respectively. Phase Two of University Park at MIT in
Cambridge, Massachusetts opened during the second quarter of 1998. This
mixed-use facility, owned in partnership with MIT, consists of 76,000 square
feet of office space, 96,000 square feet of retail space, a 210-room hotel and a
960-space parking facility and generated revenues of $2,186,000 in the first
quarter of 1999. Revenues also increased as a result of improved operations at
Liberty Center in Pittsburgh, Pennsylvania ($617,000) and The Avenue at Tower
City in Cleveland, Ohio ($628,000), as well as the opening of Millenium
($2,231,000). These increases were partially offset by decreases in revenues due
to the disposition of the Company's interest in three commercial properties in
1998: the 469,000-square-foot San Vicente office building in Brentwood,
California ($340,000), the 695,000-square-foot Summit Park Mall in Wheatfield,
New York ($1,261,000) and the Courtyard strip shopping center in Flint, Michigan
($136,000). The Commercial Group also recorded additional land sales of
$9,397,000 in the first quarter of 1999 compared to the prior year.
OPERATING AND INTEREST EXPENSES - During the first quarter of 1999, operating
expenses for the Commercial Group increased $15,513,000, or 38.3%, to
$55,982,000 from $40,469,000 in the first quarter of 1998. The increase in
operating expenses was attributable primarily to costs associated with the 1998
acquisition of the Sheraton Hotel at Station Square ($3,008,000), Fairmont Plaza
($958,000) and Pavilion ($285,000). Operating expenses also increased at
<PAGE> 13
Liberty Center ($437,000) and The Avenue at Tower City ($412,000), and as a
result of the 1998 opening of Phase Two at MIT ($1,457,000) and the 1999 opening
of Millennium ($169,000). Additional costs associated with increased land sales
were $7,547,000 compared to the first quarter of last year. Interest expense for
the first quarter of 1999 increased by $1,214,000, or 5.05%, to $24,055,000 from
$22,841,000 for the first quarter of 1998. The increase in interest expense is
primarily attributable to 1998 and 1999 additions to the Commercial Group
portfolio.
RESIDENTIAL GROUP
REVENUES - Revenues for the Residential Group increased by $3,013,000, or 9.6%,
in the first quarter of 1999 to $34,277,000 from $31,264,000 in the first
quarter of 1998. This increase was attributable to the recognition of
development and syndication fees on several projects ($455,000) and as a result
of 1998 acquisitions of the 534-unit Woodlake Apartments in Silver Spring,
Maryland ($1,196,000), a 50% interest in the 342-unit Park Plaza in Mayfield
Heights, Ohio ($319,000) and an additional 20% interest in the 450-unit Studio
Colony apartment community in Los Angeles, California ($475,000). In addition,
revenues increased in the first quarter of 1999 from the addition of 386 units
during 1998 at three apartment communities in Cleveland, Ohio ($216,000) as well
as operational increases at Colony Woods ($638,000) and Bayside Village
($162,000). These increases are partially offset by a decrease in revenues from
the 1998 disposition of Trolley Plaza in Detroit, Michigan ($687,000).
OPERATING AND INTEREST EXPENSES - Operating expenses for the Residential Group
increased by $1,488,000, or 9.2%, in the first quarter of 1999 to $17,618,000
from $16,130,000 in the first quarter of 1998. The increase in operating
expenses was primarily due to the 1998 acquisitions of Woodlake Apartments
($542,000), Park Plaza ($142,000) and a 20% interest in Studio Colony ($80,000)
and additional costs associated with the generation of increased development
fees ($1,088,000). These increases were partially offset by decreases
attributable to the sale of Trolley Plaza ($448,000). Interest expense decreased
by $615,000 in the first quarter of 1999, or 8.7%, to $6,485,000 from $7,100,000
in the same period of 1998. This decrease is primarily the result of 1998
property dispositions, a reduction in tax exempt interest rates and an increase
in interest capitalized on development projects. These decreases were partially
offset by increases in interest expense due to 1998 property acquisitions.
LAND GROUP
REVENUES - Revenues for the Land Group increased by $684,000 to $5,636,000 in
the first quarter of 1999 from $4,952,000 in the first quarter of 1998. This
increase is primarily the result of increased land sales at The Cascades in
Brooklyn, Ohio, The Greens at Birkdale Village in Huntersville, North Carolina,
and Westwood Lakes in Tampa, Florida. These increases were partially offset by
decreases at Silver Lakes in Pembroke, Florida, River Oaks in Kirtland, Ohio and
Spring Hill in Macedonia, Ohio.
<PAGE> 14
OPERATING AND INTEREST EXPENSES - Operating expenses increased by $1,404,000 for
the first quarter of 1999 to $5,878,000 from $4,474,000 for the first quarter of
1998. The increase in operating expenses is due to costs associated with
increased land sales volume over the first quarter of last year and timing of
indirect expenses. Interest expense increased by $33,000 in the first quarter of
1999 to $2,133,000 from $2,100,000 in the first quarter of 1998.
LUMBER TRADING GROUP
REVENUES - Revenues for the Lumber Trading Group increased by $8,296,000 in the
first quarter of 1999 to $34,626,000 from $26,330,000 in the first quarter of
1998. The increase was primarily due to increased lumber trading margins in the
first quarter of 1999 compared to the first quarter of 1998 ($7,649,000) and an
increase in volume at Forest City/Babin, a wholesaler of major appliances,
cabinets and hardware to housing contractors ($558,000).
OPERATING AND INTEREST EXPENSES - Operating expenses for the Lumber Trading
Group increased by $6,501,000 in the first quarter of 1999 to $30,707,000 from
$24,206,000 in the first quarter of 1998. This increase reflected higher
variable expenses due to increased trading margins compared to 1998. Interest
expense decreased by $214,000 in the first quarter of 1999 to $1,102,000 from
$1,316,000 in the first quarter of 1998.
CORPORATE ACTIVITIES
REVENUES - Corporate Activities' revenues decreased $544,000 in the first
quarter of 1999 to $129,000 from $673,000 in the first quarter of 1998.
Corporate Activities' revenues consist primarily of interest income from
investments made by the Company and vary from year to year depending on interest
rates and the amount of loans outstanding.
OPERATING AND INTEREST EXPENSES - Operating expenses for Corporate Activities
increased $731,000 in the first quarter of 1999 to $3,437,000 from $2,706,000 in
the first quarter of 1998. This increase represents additional general corporate
expenses including amortization of costs associated with the 1998 public
offering of Senior Notes (see "Financial Condition and Liquidity"). Interest
expense increased $2,480,000 in the first quarter of 1999 to $5,870,000 from
$3,390,000 in the first quarter of 1998. Corporate Activities' interest expense
consists primarily of interest expense on the 8.50% Senior Notes (issued on
March 16, 1998) and the Revolving Credit Agreement that has not been allocated
to a principal business group (see "Financial Condition and Liquidity").
OTHER TRANSACTIONS
GAIN (LOSS) ON DISPOSITION OF PROPERTIES - There was no gain (loss) on
disposition of properties for the first quarter of 1999. Gain (loss) on
disposition of properties for the first quarter of 1998 totaled a gain of
$6,920,000, resulting from the sale of the Company's interests in San Vicente,
an office building in Brentwood, California and Courtyard, a strip shopping
center in Flint, Michigan.
<PAGE> 15
EXTRAORDINARY GAIN - Extraordinary gain, net of tax, totaled $214,000 for the
three months ended April 30, 1999, representing extinguishment of nonrecourse
debt and related accrued interest. There was no extraordinary gain for the three
months ended April 30, 1998.
INCOME TAXES - Income tax expense for three months ended April 30, 1999 and 1998
totaled $3,889,000 and $6,151,000, respectively. At January 31, 1999, the
Company had a net operating loss carryforward ("NOL") for tax purposes of
$76,433,000 (generated primarily over time in the ordinary course of business
from the significant impact of depreciation expense from real estate properties
on the Company's net earnings) which will expire in the years ending January 31,
2006 through January 31, 2011 and general business credits carryovers of
$2,432,000 which will expire in the years ending January 31, 2004 through
January 31, 2013. The Company's policy is to utilize its NOL before it expires
and will consider a variety of strategies to implement that policy.
NET EARNINGS - In the first quarter of 1999, the Company's net earnings were
$5,508,000, or $.18 per share of common stock, compared to $8,508,000, or $.28
per share of common stock in the first quarter of 1998. All per share amounts
are diluted and adjusted for the two-for-one stock split that was effective July
16, 1998.
EBDT - Earnings Before Depreciation, Amortization and Deferred Taxes ("EBDT") is
defined as net earnings from operations before depreciation, amortization and
deferred taxes on income, and excludes provision for decline in real estate,
gain (loss) on disposition of properties and extraordinary items. The Company
excludes depreciation and amortization expense related to real estate operations
from EBDT because they are non-cash items and the Company believes the values of
its properties, in general, have appreciated, over time, in excess of their
original cost. Deferred income taxes from real estate operations are excluded
because they are a non-cash item. The provision for decline in real estate is
excluded from EBDT because it is a non-cash item that varies from year to year
based on factors unrelated to the Company's overall financial performance. The
Company excludes gain (loss) on the disposition of properties from EBDT because
it develops and acquires properties for long-term investment, not short-term
trading gains. As a result, the Company views dispositions of properties other
than commercial land or land held by the Land Group as nonrecurring items.
Extraordinary items are generally the result of the restructuring of nonrecourse
debt obligations and are not considered to be a component of the Company's
operating results.
FINANCIAL CONDITION AND LIQUIDITY
The Company believes that its sources of liquidity and capital are adequate. The
Company's principal sources of funds are cash provided by operations, the
revolving credit facility and refinancings of existing properties. The Company's
principal use of funds are the financing of development and acquisitions of real
estate projects, capital expenditures for its existing portfolio and payments on
nonrecourse mortgage debt on real estate.
<PAGE> 16
REVOLVING CREDIT FACILITY - At April 30, 1999, the Company had $117,000,000
outstanding under its $225,000,000 revolving credit facility. The Company's
revolving credit facility matures December 10, 2001, unless extended, and allows
for up to a combined amount of $30,000,000 in outstanding letters of credit or
surety bonds. Outstanding letters of credit reduce the credit available to the
Company, and $13,595,000 were outstanding as of April 30, 1999. On each
anniversary date, the maturity date may be extended by one year by unanimous
consent of the nine participating banks. At the maturity date, the outstanding
revolving credit loans, if any, may be converted by the Company to a four-year
term loan. The revolving credit available is reduced quarterly by $2,500,000
beginning April 1, 1998. At April 30, 1999, the revolving credit line was
$212,500,000.
The revolving credit facility provides, among other things, for: 1) interest
rates of 2% over LIBOR or 1/4% over the prime rate; 2) maintenance of debt
service coverage ratios and specified levels of net worth and cash flow (as
defined); and 3) restriction on dividend payments.
The Company has entered into a one-year 5.125% LIBOR option expiring January 3,
2000 on $75,000,000 of the revolving credit line. To further protect borrowings
under this facility from variable interest rates, the Company has purchased a
6.50% LIBOR interest rate cap for 2000 and an average 6.75% LIBOR interest rate
cap for 2001 at notional amounts of $42,387,000 and $37,423,000, respectively.
SENIOR NOTES - On March 16, 1998, the Company issued $200,000,000 in 8.50%
senior notes due March 15, 2008 in a public offering. Net proceeds of
$195,500,000 were contributed to the capital of Forest City Rental Properties
Corporation, a wholly-owned subsidiary, and were then used to repay $114,000,000
outstanding on its term loan and revolving credit loans. The remaining proceeds
were used to finance acquisition and development of real estate projects.
Accrued interest on the senior notes is payable semiannually on March 15 and
September 15. The senior notes are unsecured senior obligations of the Company,
however, they are subordinated to all existing and future indebtedness and other
liabilities of the Company's subsidiaries, including borrowings under the
revolving credit facility. The indenture contains covenants providing, among
other things, limitations on incurring additional debt and payment of dividends.
LUMBER TRADING GROUP - The Lumber Trading Group is financed separately from the
rest of the Company's principal business groups. The financing obligations of
Lumber Trading Group are without recourse to the Company. Accordingly, the
liquidity of Lumber Trading Group is discussed separately below under "Lumber
Trading Group Liquidity."
<PAGE> 17
MORTGAGE REFINANCINGS
During the quarter ended April 30, 1999, the Company completed $174,000,000 in
financings, including $138,000,000 in refinancings and $36,000,000 for new
development projects. The Company is pursuing the refinancing of its nonrecourse
mortgage debt which matures within the next 12 months. In addition, the Company
is attempting to extend the maturities and/or refinance the nonrecourse debt
that is coming due in 2000 and 2001, generally pursuing a strategy of utilizing
long-term fixed rate debt and taking advantage of favorable financial market
conditions.
INTEREST RATE EXPOSURE
April 30, 1999, the composition of nonrecourse mortgage debt is as follows:
<TABLE>
<CAPTION>
Amount Rate(1)
------ -------
(in thousands)
<S> <C> <C>
Fixed $ 1,647,011 7.54%
Variable -
Hedged(2) 148,291 6.86%
Unhedged 206,190 6.70%
Tax-Exempt 153,821 4.86%
UDAG and other
subsidized loans (fixed) 69,761 2.57%
--------------
$ 2,225,074 7.07%
==============
</TABLE>
(1) The weighted average interest rates shown above include both the base index
and the lender margin.
(2) The hedged debt of $148,291 represents $133,479 of 1-year LIBOR contracts
and $14,812 of LIBOR-based swaps that have a combined average term of .60
years as of April 30, 1999.
Interest rate caps and swaps are purchased to reduce short-term variable
interest rate risk. The Company has purchased 6.50% LIBOR interest rate cap
protection for its variable-rate debt portfolio in the amount of $394,503,000
and $457,613,000 for the years ending January 31, 2000 and 2001, respectively.
In addition, LIBOR interest rate caps averaging 6.75% in the amount of
$362,577,000 and $79,929,000 have been purchased for the year ending January 31,
2002 and the three year period ending September 1, 2003, respectively. In order
to reduce the risk associated with increases in interest rates, the Company has
purchased 10-year Treasury Options at a strike rate of 6.00% in the amounts of
$86,100,000, $41,252,000 and $38,677,000 with the exercise dates of February
2000, April 2001 and August 2001, respectively. The Company generally does not
hedge tax-exempt debt because, since 1990, the base rate of this type of
financing has averaged only 3.60% and has never exceeded 7.90%.
At April 30, 1999, a 100 basis point increase in taxable interest rates would
increase the annual pre-tax interest cost of the Company's taxable variable-rate
debt by approximately $2,100,000. Although tax-exempt rates generally increase
in an amount that is smaller than corresponding changes in taxable interest
rates, a 100 basis point increase in tax-exempt
<PAGE> 18
interest rates would increase the annual pre-tax interest cost of the Company's
tax-exempt variable-rate debt by approximately $1,500,000.
LUMBER TRADING GROUP LIQUIDITY
The Lumber Trading Group is separately financed with two revolving lines of
credit and a nonrecourse accounts receivable sale program. These credit
facilities are without recourse to the Company.
At April 30, 1999, Lumber Trading Group's two lines of credit totaled a
$67,000,000 commitment expiring June 30, 1999. These credit lines are secured by
the assets of the Lumber Trading Group and are used by the Trading Group to
finance its working capital needs. At April 30, 1999, $637,000 was outstanding
under these facilities.
The Lumber Trading Group also has sold an undivided ownership interest in a pool
of accounts receivable of up to a maximum of $91,800,000 and uses this program
to finance its working capital needs. At April 30, 1999, $64,000,000 had been
sold under this accounts receivable program.
The Company believes that the amounts available under these credit facilities,
together with the accounts receivable sale program, will be sufficient to meet
the Lumber Trading Group's liquidity needs.
CASH FLOWS
Net cash provided by operating activities was $23,430,000 for the first quarter
of 1999. Net cash used in operating activities was $8,690,000 for the first
quarter of 1998. The increase in net cash provided by operating activities is
the result of an increase of $50,824,000 in rents and other revenues received
principally comprised of an increase in consolidated revenues of $33,071,000, a
decrease in notes and accounts receivable of $16,880,000 (resulting from a
decrease of $20,985,000 in the first quarter of 1999 versus a decrease of
$4,105,000 in the first quarter of 1998) primarily from Lumber Trading Group and
an increase of $1,642,000 in proceeds from land sales. These increases were
partially offset by a $10,423,000 increase in expenditures for operating
expenses primarily due to a decrease in accounts payable in Lumber Trading
Group, an increase of $5,943,000 in land development expenditures and an
increase of $3,980,000 in interest paid.
Net cash used in investing activities totaled $95,690,000 and $104,083,000 for
the first quarter of 1999 and 1998, respectively. Capital expenditures, other
than development and acquisition activities, totaled $14,244,000 and $8,481,000
(including both recurring and investment capital expenditures) in the first
quarter of 1999 and 1998, respectively and were financed with cash on hand at
the beginning of the year in 1998 and, in 1999, cash provided from operating
activities. The Company invested $67,084,000 and $92,083,000 in acquisition and
development of real estate projects in the first quarter of 1999 and 1998,
respectively.
<PAGE> 19
These expenditures were financed with approximately $36,000,000 and $33,000,000
in new mortgage indebtedness incurred in the first quarter of 1999 and 1998,
respectively, borrowings under the revolving credit facility in 1999 and
proceeds from the issuance of senior notes in 1998. The Company invested
$14,362,000 and $35,141,000 in investments in and advances to affiliates in the
first quarter of 1999 and 1998, respectively. The first quarter of 1999
investments primarily related to New York City area urban development
($2,419,000) and the following syndicated residential projects: The Grand, a
546-unit luxury high-rise apartment building in North Bethesda, Maryland that
opened in February 1999 ($6,539,000), Philip Morris at Tobacco Row, a 175-unit
apartment renovation project currently under construction in Richmond, Virginia
($2,047,000), 101 San Fernando, a 316-unit apartment complex currently under
construction ($1,000,000) and The Enclave, a 637-unit apartment community
opening in phases during 1998 and 1999 ($929,000), both in San Jose, California.
The first quarter of 1998 investments were primarily related to 101 San Fernando
($19,312,000), The Enclave ($10,212,000) and The Grand ($3,615,000). In
addition, in the first quarter of 1998, $31,622,000 was collected in proceeds
from the disposition of the Company's interest in San Vicente ($27,244,000) and
Courtyard ($4,378,000).
Net cash provided by financing activities totaled $58,895,000 and $131,806,000
in the first quarter of 1999 and 1998, respectively. The Company's refinancing
of mortgage indebtedness is discussed above in "Mortgage Refinancings" and
borrowings under new mortgage indebtedness for acquisition and development
activities is included in the preceding paragraph discussing net cash used in
investing activities. Net cash provided by financing activities for the first
quarter of 1999 also reflected a decrease of $16,638,000 in net borrowings under
Lumber Trading Group's lines of credit, an increase of $14,694,000 in notes
payable primarily related to two hotels under construction in New York City, a
decrease in restricted cash and book overdrafts of $1,269,000 and payment of
$1,199,000 of dividends. During the first quarter of 1998, the Company received
net proceeds from the issuance of senior notes in March 1998 of $194,665,000
which were initially used to repay $114,000,000 of long-term debt. In addition,
net cash provided by financing activities in the first quarter of 1998 reflected
a $6,457,000 increase in net borrowings under Lumber Trading Group's lines of
credit, the release of $6,830,000 in restricted cash, an increase of $7,919,000
in book overdrafts, payment of deferred financing costs of $5,618,000 and
payment of $1,049,000 of dividends.
SHELF REGISTRATION
On December 3, 1997, the Company filed a shelf registration statement with the
Securities and Exchange Commission for the potential offering on a delayed basis
of up to $250,000,000 in debt or equity securities. This registration was in
addition to the shelf registration filed March 4, 1997 of up to $250,000,000 in
debt or equity securities. The Company has sold approximately $82,000,000
through a common equity offering completed on May 20, 1997 and $200,000,000
through a debt offering completed on March 16, 1998. The Company currently has
available approximately $218,000,000 on the second shelf registration statement
of debt, equity or any combination thereof.
<PAGE> 20
INCREASED DIVIDEND
The first 1999 quarterly dividend of $.04 per share on shares of both Class A
and Class B Common Stock were declared on March 11, 1999 and will be paid on
June 15, 1999 to shareholders of record at the close of business on June 1,
1999. The second 1999 quarterly dividend of $.05 (representing a 25% increase
over the previous quarter's dividend) per share on shares of both Class A and
Class B Common Stock were declared on June 8, 1999 and will be paid on September
15, 1999 to shareholders of record at the close of business on September 1,
1999.
NEW ACCOUNTING STANDARDS
In the first quarter of 1999, the Company adopted SOP 98-5, "Reporting on the
Costs of Start-up Activities." This statement requires that start-up costs and
organization costs be expensed as incurred. The adoption of this accounting
principle had no material effect on earnings or financial position.
The Financial Accounting Standards Board (FASB) is reevaluating the required
implementation date for SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities." This statement requires recognition of all derivatives as
either assets or liabilities and measurements of those instruments at fair
value. The Company will adopt SFAS 133 on the required implementation date that
the FASB will ultimately decide upon.
YEAR 2000
The Company is completing its plan to prepare its financial and operational
computer systems and embedded applications for the Year 2000. The Company
believes that 90% of the required modifications have been completed, the total
cost of which is not expected to be material to the Company's operating results.
The Company anticipates that the remaining modifications will be made by the end
of the second quarter of 1999.
For business reasons unrelated to the Year 2000, the Company's computer systems
have moved from a mainframe environment to a distributed environment. Major
processing systems were replaced with Year 2000-compliant software or software
with definitive plans for upgrades to Year 2000 compliant code. Costs for this
project were approximately $4 million. In addition, the Lumber Trading Group
successfully converted their internal systems to Year 2000-compliant code.
With a majority of the Company's core businesses using Year 2000-compliant
software code, the Company's plan has been focused on testing the compliant
systems and identifying other systems, such as embedded systems, to ensure that
they have an active Year 2000 compliance program.
<PAGE> 21
Since 1996, senior management and the audit committee have been alerted to the
Year 2000 issue and have been provided a quarterly report regarding the
Company's Year 2000 compliance plan. The Company's independent auditors have
been reviewing the plan and its progress. Each principal business group has
formed a Year 2000 compliance committee under senior management's direction.
As part of the due diligence in the acquisitions of new properties, the Company
continues to review Year 2000 compatibility and has updated the terms and
conditions of its purchasing function to require goods and services purchased to
be Year 2000-compliant.
The process of inventory collection has been completed at the Corporate and
principal business group level for hardware, software and embedded systems.
Inventory collection is in process at certain regional offices and will be
completed by the end of the second quarter of 1999. The Company has made
excellent progress in notifying vendors and business partners of its progress
relating to the Year 2000 compliance plan.
Our testing procedures have uncovered some Year 2000 software issues which have
been corrected. The upgrading of the general ledger software and its various
interfaces is proceeding as planned.
The Company has tested most of the embedded systems, particularly those related
to the safety of our employees, tenants and customers. The testing has
determined that an energy management system interface at one of the Company's
commercial facilities and certain gate access systems at residential facilities
are not compliant and will need to be upgraded in 1999.
The Company has identified issues related to hardware, software and embedded
systems and developed a contingency plan to respond to each concern. For
hardware, the primary concern is that a specific computer or server would not be
compliant. In that case, the Company would use other available hardware,
provided by our business continuity/disaster recovery program, that is compliant
to regenerate data from our backup systems.
For software, the primary concern is that the automated software scheduling
routines would not properly schedule in the Year 2000. Each of these automated
scheduling systems has a manual function that has been tested.
For embedded systems, the primary concern is that these systems, despite
testing, would not function properly in the Year 2000. All of these systems have
manual reset functions and Year 2000 date issues can be corrected. Additionally,
the Company will have appropriate personnel and outside contractors, if
necessary, on site starting the evening of December 31, 1999 and the ensuing
weekend to reset the functions if necessary. The Company does not believe any of
the systems related to the safety of our tenants or customers will be affected.
<PAGE> 22
The Company is highly dependent upon systems in the public sector such as
utilities, mail, government agencies and transportation systems. Failures in
those systems upon which the Company has no control could materially affect
operations. The property sites have well-defined emergency plans in place that
would be activated if necessary. The Year 2000 plan is aimed at identifying and
correcting all issues upon which the Company has direct control or indirect
control through its vendors and business partners. The Company feels that the
successful completion of its Year 2000 plan will avoid or minimize any adverse
effect of the Year 2000 issue on operations.
INFORMATION RELATED TO FORWARD-LOOKING STATEMENTS
This Form 10Q, together with other statements and information publicly
disseminated by the Company, contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such statements reflect
management's current views with respect to financial results related to future
events and are based on assumptions and expectations which may not be realized
and are inherently subject to risks and uncertainties, many of which cannot be
predicted with accuracy and some of which might not even be anticipated. Future
events and actual results, financial or otherwise, may differ from the results
discussed in the forward-looking statements. Risks and other factors that might
cause differences, some of which could be material, include, but are not limited
to, the effect of economic and market conditions on a nationwide basis as well
as regionally in areas where the Company has a geographic concentration of
properties; failure to consummate financing arrangements; development risks,
including lack of satisfactory financing, construction and lease-up delays and
cost overruns; the level and volatility of interest rates; financial stability
of tenants within the retail industry, which may be impacted by competition and
consumer spending; the rate of revenue increases versus expenses increases; the
cyclical nature of the lumber wholesaling business; as well as other risks
listed from time to time in the Company's reports filed with the Securities and
Exchange Commission. The Company has no obligation to revise or update any
forward-looking statements as a result of future events or new information.
Readers are cautioned not to place undue reliance on such forward-looking
statements.
<PAGE> 23
FOREST CITY ENTERPRISES, INC.
EARNINGS BEFORE DEPRECIATION, AMORTIZATION AND DEFERRED TAXES
FOR THE THREE MONTHS ENDED APRIL 30, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMERCIAL GROUP RESIDENTIAL GROUP LAND GROUP
---------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
------------ ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES $ 107,026 $ 85,404 $ 34,277 $ 31,264 $ 5,636 $ 4,952
OPERATING EXPENSES,
INCLUDING DEPRECIATION
AND AMORTIZATION FOR NON-
REAL ESTATE GROUPS 55,982 40,469 17,618 16,130 5,878 4,474
INTEREST EXPENSE 24,055 22,841 6,485 7,100 2,133 2,100
INCOME TAX PROVISION 2,531 1,276 1,310 507 (915) (640)
------------ ------------- ------------ ------------ ------------ ------------
82,568 64,586 25,413 23,737 7,096 5,934
------------ ------------- ------------ ------------ ------------ ------------
EARNINGS BEFORE
DEPRECIATION, AMORTIZATION
AND DEFERRED TAXES
(EBDT) $ 24,458 $ 20,818 $ 8,864 $ 7,527 ($ 1,460) ($ 982)
============ ============= ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
LUMBER TRADING GROUP CORPORATE ACTIVITIES TOTAL
-------------------------- -------------------------- ------------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES $ 34,626 $ 26,330 $ 129 $ 673 $ 181,694 $ 148,623
OPERATING EXPENSES,
INCLUDING DEPRECIATION
AND AMORTIZATION FOR NON-
REAL ESTATE GROUPS 30,707 24,206 3,437 2,706 113,622 87,985
INTEREST EXPENSE 1,102 1,316 5,870 3,390 39,645 36,747
INCOME TAX PROVISION 1,125 415 (2,754) (2,262) 1,297 (704)
------------ ------------ ------------ ------------ ------------- --------------
32,934 25,937 6,553 3,834 154,564 124,028
------------ ------------ ------------ ------------ ------------- --------------
EARNINGS BEFORE
DEPRECIATION, AMORTIZATION
AND DEFERRED TAXES
(EBDT) $ 1,692 $ 393 ($ 6,424) ($ 3,161) $ 27,130 $ 24,595
============ ============ ============ ============ ============= ==============
</TABLE>
<TABLE>
<CAPTION>
TOTAL
------------------------------
1999 1998
------------- --------------
<S> <C> <C>
RECONCILIATION TO NET EARNINGS:
EARNINGS BEFORE DEPRECIATION,
AMORTIZATION AND DEFERRED TAXES (EBDT) $ 27,130 $ 24,595
DEPRECIATION AND AMORTIZATION - REAL ESTATE GROUPS (19,244) (20,679)
DEFERRED TAXES - REAL ESTATE GROUPS (2,592) (2,328)
GAIN ON DISPOSITION OF PROPERTIES, NET OF TAX 0 6,920
EXTRAORDINARY GAIN, NET OF TAX 214 0
------------- --------------
NET EARNINGS $ 5,508 $ 8,508
============= ==============
</TABLE>
<PAGE> 24
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
-----------------------------------------------------------
The Company's primary market risk exposure is interest rate risk. At April 30,
1999, the Company had $625,300,000 of variable-rate debt outstanding.
Additionally, the Company has interest rate risk associated with fixed-rate debt
at maturity.
To reduce the effects of significant increases in interest rates on the amounts
payable with respect to the Company's variable-rate debt, the Company makes use
of interest rate exchange agreements, including interest rate caps and swaps,
primarily to manage interest rate risk associated with variable-rate debt. The
Company had purchased London Interbank Offered Rate ("LIBOR") interest rate caps
as follows.
<TABLE>
<CAPTION>
Cap
Strike Principal
Rate Period Outstanding
----- ------------------- ------------
<S> <C> <C>
6.50% 02/01/99 - 01/31/00 $394,503,000
6.50% 02/01/00 - 01/31/01 457,613,000
6.50% 02/01/01 - 07/31/01 362,577,000
7.00% 08/01/01 - 02/01/02 362,577,000
6.75% 09/01/00 - 09/01/03 79,929,000
</TABLE>
The Company intends to convert a significant portion of its committed
variable-rate debt to fixed-rate debt. In addition, to reduce the effect of
upward fluctuations in future interest rates, the Company has purchased 10-year
Treasury Options at a strike rate of 6.00% in the amounts of $86,100,000,
$41,252,000 and $38,677,000 with the exercise dates of February 2000, April 2001
and August 2001, respectively.
At April 30, 1999, the Company had $117,000,000 outstanding under its
$225,000,000 revolving credit facility, which bears interest at LIBOR plus 2%.
The Company has entered into a one-year 5.125% LIBOR option expiring January 3,
2000 on $75,000,000 for its revolving credit line. Additionally, the Company has
purchased a 6.50% LIBOR interest rate cap for 2000 and an average 6.75% LIBOR
interest rate cap for 2001 at notional amounts of $42,387,000 and $37,423,000,
respectively.
At April 30, 1999, the Company estimates that a 100 basis point decrease in
market interest rates would have changed the fair value of fixed-rate debt at
that date of $1,884,097,000 to a liability of approximately $2,000,634,000. The
sensitivity to changes in interest rates of the Company's fixed-rate debt was
determined with a valuation model based upon changes that measure the net
present value of such obligation which arise from the hypothetical estimate as
discussed above. The Company intends to monitor and manage interest costs on its
variable debt portfolio and may enter into swap positions based on market
fluctuations.
The table below provides information about the Company's financial instruments
that are sensitive to changes in interest rates.
<PAGE> 25
Item 3. Quantitative and Qualitative Disclosures About Market Risk. (continued)
<TABLE>
<CAPTION>
FAIR MARKET
LONG-TERM DEBT TOTAL VALUE
- -------------------------------------------- -------------------------- ----------------------
<S> <C> <C>
FIXED:
Fixed rate debt (1) $ 1,647,011,155 $ 1,636,754,420
Weighted average interest rate $ 7.54%
UDAG (1) $ 69,761,152 $ 44,342,610
Weighted average interest rate 2.57%
Senior notes $ 200,000,000 $ 203,000,000
Weighted average interest rate 8.50%
-------------------------- ----------------------
Total Fixed Rate Debt $ 1,916,772,307 $ 1,884,097,030
VARIABLE:
Variable rate debt (1) (2) $ 354,480,456 $ 354,480,456
Weighted average interest rate 6.78%
Revolving credit facility $ 117,000,000 $ 117,000,000
Weighted average interest rate 7.07%
Tax exempt (1) $ 153,820,875 $ 153,820,875
Weighted average interest rate 4.86%
-------------------------- ----------------------
Total Variable Rate Debt $ 625,301,331 $ 625,301,331
-------------------------- ----------------------
TOTAL LONG-TERM DEBT $ 2,542,073,638 $ 2,509,398,361
========================== ======================
</TABLE>
(1) Represents nonrecourse debt.
(2) As of April 30, 1999, $148,291,000 of variable rate debt has been hedged
via $133,479,000 of 1-year LIBOR contracts and $14,812,000 of LIBOR-based
swaps that have a combined average life of 0.60 years.
<PAGE> 26
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
- -------------------------
An action was filed in August 1997 against Forest City Trading Group, Inc. (a
wholly-owned subsidiary of the Company) and 10 of its subsidiaries, all of which
are in the business of trading lumber. The complaint alleged improper
calculation and underpayment of commissions and other related claims. On
September 11, 1998 Plaintiffs filed a Motion for Class Certification. On
December 8, 1998 the court posted an order denying class certification. On April
5, 1999 the original four Plaintiffs filed a notice of dismissal of this lawsuit
without prejudice in state court. On April 16, 1999, the case was re-filed in
Federal court against Forest City Trading Group, Inc. and four of its
subsidiaries. The Defendants will vigorously defend the allegations. This
litigation is not expected to have a material adverse effect upon the financial
condition, results of operations or cash flows of the Company.
The Company, through subsidiaries, owns a 14.6% interest in the Seven Hills
housing development, located in Henderson, Nevada, which is owned by the Silver
Canyon Partnership and is being developed in conjunction with a golf course. In
August 1997, a class-action lawsuit was filed by the current homeowners in Seven
Hills against the Silver Canyon Partnership, the golf course developers and
other entities, including the Company. In addition, separate lawsuits were filed
by some of the production homebuilding companies at Seven Hills, against some of
the same parties, not including the Company. Each of these lawsuits sought a
commitment for public play on the golf course, as well as damages and, in
October 1998, the court granted play rights. In February 1999 the owner of the
golf course filed a cross-claim against the Silver Canyon Partnership and the
Company. Sales efforts are continuing at the Seven Hills development, and
because these events are recent, it is not yet possible to determine the extent
of any impact on the Partnership's financial performance. The Company believes
that any exposure will be limited to the Silver Canyon Partnership and is not
expected to have a material adverse effect upon the financial condition, results
of operations or cash flows of the Company.
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
3.1 - Amended Articles of Incorporation adopted as of
October 11, 1983, incorporated by reference to
Exhibit 3.1 to the Company's Form 10-Q for the
quarter ended October 31, 1983 (File No. 1-4372).
3.2 - Code of Regulations as amended June 14, 1994,
incorporated by reference to Exhibit 3.2 to the
Company's Form 10-K for the fiscal year ended
January 31, 1997 (File No.1-4372).
<PAGE> 27
Exhibit
Number Description of Document
------ -----------------------
3.3 - Certificate of Amendment by Shareholders to the
Articles of Incorporation of Forest City
Enterprises, Inc. dated June 24, 1997, incorporated
by reference to Exhibit 4.14 to the Company's
Registration Statement on Form S-3 (Registration No.
333-41437).
3.4 - Certificate of Amendment by Shareholders to the
Articles of Incorporation of Forest City
Enterprises, Inc. dated June 16, 1998, incorporated
by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-8 (Registration No.
333-61925).
4.1 - Form of Senior Subordinated Indenture between the
Company and National City Bank, as Trustee
thereunder, incorporated by reference to Exhibit 4.1
to the Company's Registration Statement on Form S-3
(Registration No. 333-22695).
4.2 - Form of Junior Subordinated Indenture between the
Company and National City Bank, as Trustee
thereunder, incorporated by reference to Exhibit 4.2
to the Company's Registration Statement on Form S-3
(Registration No. 333-22695).
4.3 - Form of Senior Subordinated Indenture between the
Company and The Bank of New York, as Trustee
thereunder, incorporated by reference to Exhibit
4.22 to the Company's Registration Statement on Form
S-3 (Registration No. 333-41437).
10.1 - Credit Agreement, dated as of December 10, 1997, by
and among Forest City Rental Properties Corporation,
the banks named therein, KeyBank National
Association, as administrative agent, and National
City Bank, as syndication agent, incorporated by
reference to Exhibit 10.38 to the Company's Form
10-Q for the quarter ended October 31, 1997 (File
No. 1-4372).
10.2 - Guaranty of Payment of Debt, dated as of December
10, 1997, by and among Forest City Enterprises,
Inc., the banks named therein, KeyBank National
Association, as administrative agent, and National
City Bank, as syndication agent, incorporated by
reference to Exhibit 10.39 the Company's Form 10-Q
for the quarter ended October 31, 1997 (File No.
1-4372)
<PAGE> 28
Exhibit
Number Description of Document
------ -----------------------
10.3 - First Amendment to Credit Agreement, dated as of
January 20, 1998, by and among Forest City Rental
Properties Corporation, the banks named therein,
KeyBank National Association, as administrative
agent, and National City Bank, as syndication agent,
incorporated by reference to Exhibit 4.19 to the
Company's Registration Statement on Form S-3 (File
No. 333-41437).
10.4 - First Amendment to Guaranty of Payment of Debt,
dated as of the banks named therein, KeyBank
National Association, as administrative agent, and
National City Bank, as syndication agent,
incorporated by reference to Exhibit 4.20 to the
Company's Registration Statement on Form S-3 (File
No. 333-41437).
10.5 - Letter Agreement, dated as of February 25, 1998, by
and among Forest City Enterprises, Inc., Forest City
Rental Properties Corporation, the banks named
therein, KeyBank National Association, as
administrative agent, and National City Bank, as
syndication agent, incorporated by reference to
Exhibit 4.21 to the Company's Registration Statement
on Form S-3 (File No. 333-41437).
10.6 - Second Amendment to Credit Agreement, dated as of
March 6, 1998, by and among Forest City Rental
Properties Corporation, the banks named therein,
KeyBank National Association, as administrative
agent, and National City Bank, as syndication agent,
incorporated by reference to Exhibit 10.1 to the
Company's Form 8-K, dated March 6, 1998 (File No.
1-4372).
10.7 - Second Amendment to Guaranty of Payment of Debt,
dated as of March 6, 1998, by and among Forest City
Enterprises, Inc., the banks named therein, KeyBank
National Association, as administrative agent, and
National City Bank, as syndication agent,
incorporated by reference to Exhibit 10.2 to the
Company's Form 8-K, dated March 6, 1998 (File No.
1-4372).
10.8 - Stock Purchase Agreement, dated May 7, 1997, between
Forest City Enterprises, Inc. and Richard Miller,
Aaron Miller and Gabrielle Miller, incorporated by
reference to Exhibit 10.34 to the Company's Form
10-Q for the quarter ended April 30, 1997 (File No.
1-4372).
<PAGE> 29
Exhibit
Number Description of Document
------ -----------------------
10.9 - Letter Agreement, dated August 14, 1997, adjusting
the interest rate in the Stock Purchase Agreement,
dated May 7, 1997, between Forest City Enterprises,
Inc. and Richard Miller, Aaron Miller and Gabrielle
Miller, incorporated by reference to Exhibit 10.35
to the Company's Form 10-Q for the quarter ended
July 31, 1997 (File No. 1-4372).
10.10 - Supplemental Unfunded Deferred Compensation Plan for
Executives, incorporated by reference to Exhibit
10.9 to the Company's Form 10-K for the year ended
January 31, 1997 (File No. 1-4372).
10.11 - Deferred Compensation Agreement between Forest City
Enterprises, Inc. and Thomas G. Smith, dated
December 27, 1995, incorporated by reference to
Exhibit 10.33 to the Company's Form 10-K for the
year ended January 31, 1997 (File No. 1-4372).
10.12 - 1994 Stock Option Plan, including forms of Incentive
Stock Option Agreement and Nonqualified Stock Option
Agreement, incorporated by reference to Exhibit
10.10 to the Company's Form 10-K for the year ended
January 31, 1997 (File No. 1-4372).
10.13 - Employment Agreement entered into as of September
25, 1989 by the Company and Albert B. Ratner,
incorporated by reference to Exhibit 10.11 to the
Company's Form 10-K for the year ended January 31,
1997 (File No. 1-4372).
10.14 - First Amendment to Employment Agreement entered into
as of December 6, 1996 by the Company and Albert B.
Ratner, incorporated by reference to Exhibit 10.12
to the Company's Form 10-K for the year ended
January 31, 1997 (File No. 1-4372).
10.15 - Employment Agreement entered into on April 6, 1998,
effective as of February 1, 1997, by the Company and
Samuel H. Miller, incorporated by reference to
Exhibit 10.15 to the Company's Form 10-K for the
year ended January 31, 1998 (File No. 1-4372).
10.16 - Employment Agreement entered into on April 6, 1998,
effective as of February 1, 1997, by the Company and
Charles A. Ratner, incorporated by reference to
Exhibit 10.16 to the Form 10-K for the year ended
January 31, 1998 (File No.1-4372).
<PAGE> 30
Exhibit
Number Description of Document
------ -----------------------
10.17 - First Amendment to Employment Agreement (dated April
6, 1998) entered into as of April 24, 1998 by the
Company and Charles A. Ratner, incorporated by
reference to Exhibit 10.17 to the Company's Form
10-K for the year ended January 31, 1998 (File No.
1-4372).
10.18 - First Amendment to Employment Agreement (dated
December 6, 1996 and superseded by Employment
Agreement dated April 6, 1998) entered into as of
December 6, 1996 by the Company and Charles A.
Ratner, incorporated by reference to Exhibit 10.18
to the Company's Form 10-K for the year ended
January 31, 1997 (File No.1-4372).
10.19 - Employment Agreement entered into on April 6, 1998,
effective as of February 1, 1997, by the Company and
James A. Ratner, incorporated by reference to
Exhibit 10.19 to the Company's Form 10-K for the
year ended January 31, 1998 (File No. 1-4372).
10.20 - Employment Agreement entered into on April 6, 1998,
effective as of February 1, 1997, by the Company and
Ronald A. Ratner, incorporated by reference to
exhibit 10.20 to the Company's Form 10-K for the
year ended January 31, 1998 (File No. 1-4372).
10.21 - Employment Agreement entered into as of September
25, 1989 by the Company and Nathan P. Shafran,
incorporated by reference to Exhibit 10.14 to the
Company's Form 10-K for the year ended January 31,
1997 (File No. 1-4372).
10.22 - Split Dollar Insurance Agreement and Assignment of
Life Insurance Policy as Collateral between Deborah
Ratner Salzberg and Forest City Enterprises, Inc.,
insuring the lives of Albert Ratner and Audrey
Ratner, dated June 26, 1996, incorporated by
reference to Exhibit 10.19 to the Company's Form
10-K for the year ended January 31, 1997 (File No.
1-4372).
10.23 - Split Dollar Insurance Agreement and Assignment of
Life Insurance Policy as Collateral between Brian J.
Ratner and Forest City Enterprises, Inc., insuring
the lives of Albert Ratner and Audrey Ratner, dated
June 26, 1996, incorporated by reference to Exhibit
10.20 to the Company's Form 10-K for the year ended
January 31, 1997 (File No. 1-4372).
<PAGE> 31
Exhibit
Number Description of Document
10.24 - Letter Supplement to Split Dollar Insurance
Agreement and Assignment of Life Insurance Policy as
Collateral between Brian J. Ratner and Forest City
Enterprises, Inc., insuring the lives of Albert
Ratner and Audrey Ratner, effective June 26, 1996,
incorporated by reference to Exhibit 10.21 to the
Company's Form 10-K for the year ended January 31,
1997 (File No. 1-4372).
10.25 - Letter Supplement to Split Dollar Insurance
Agreement and Assignment of Life Insurance Policy as
Collateral between Deborah Ratner Salzberg and
Forest City Enterprises, Inc., insuring the lives of
Albert Ratner and Audrey Ratner, effective June 26,
1996, incorporated by reference to Exhibit 10.22 to
the Company's Form 10-K for the year ended January
31, 1997 (File No. 1-4372).
10.26 - Split Dollar Insurance Agreement and Assignment of
Life Insurance Policy as Collateral between Albert
B. Ratner and James Ratner, Trustees under the
Charles Ratner 1992 Irrevocable Trust Agreement and
Forest City Enterprises, Inc., insuring the lives of
Charles Ratner and Ilana Horowitz (Ratner), dated
November 2, 1996, incorporated by reference to
Exhibit 10.23 to the Company's Form 10-K for the
year ended January 31, 1997 (File No. 1-4372).
10.27 - Split Dollar Insurance Agreement and Assignment of
Life Insurance Policy as Collateral between Albert
B. Ratner and James Ratner, Trustees under the
Charles Ratner 1989 Irrevocable Trust Agreement and
Forest City Enterprises, Inc., insuring the life of
Charles Ratner, dated October 24, 1996, incorporated
by reference to Exhibit 10.24 to the Company's Form
10-K for the year ended January 31, 1997 (File No.
1-4372).
10.28 - Split Dollar Insurance Agreement and Assignment of
Life Insurance Policy as Collateral between Albert
B. Ratner and James Ratner, Trustees under the Max
Ratner 1988 Grandchildren's Trust Agreement and
Forest City Enterprises, Inc., insuring the life of
Charles Ratner, dated October 24, 1996, incorporated
by reference to Exhibit 10.25 to the Company's Form
10-K for the year ended January 31, 1997 (File No.
1-4372).
<PAGE> 32
Exhibit
Number Description of Document
10.29 - Split Dollar Insurance Agreement and Assignment of
Life Insurance Policy as Collateral between Albert
B. Ratner and James Ratner, Trustees under the Max
Ratner 1988 Grandchildren's Trust Agreement and
Forest City Enterprises, Inc., insuring the life of
Charles Ratner, dated October 24, 1996, incorporated
by reference to Exhibit 10.26 to the Company's Form
10-K for the year ended January 31, 1997 (File No.
1-4372).
10.30 - Split Dollar Insurance Agreement and Assignment of
Life Insurance Policy as Collateral between Albert
B. Ratner and James Ratner, Trustees under the Max
Ratner 1988 Grandchildren's Trust Agreement and
Forest City Enterprises, Inc., insuring the life of
Charles Ratner, dated October 24, 1996, incorporated
by reference to Exhibit 10.27 to the Company's Form
10-K for the year ended January 31, 1997 (File No.
1-4372).
10.31 - Split Dollar Insurance Agreement and Assignment of
Life Insurance Policy as Collateral between Albert
B. Ratner and James Ratner, Trustees under the Max
Ratner 1988 Grandchildren's Trust Agreement and
Forest City Enterprises, Inc., insuring the life of
Charles Ratner, dated October 24, 1996, incorporated
by reference to Exhibit 10.28 to the Company's Form
10-K for the year ended January 31, 1997 (File No.
1-4372).
10.32 - Split Dollar Insurance Agreement and Assignment of
Life Insurance Policy as Collateral between Albert
B. Ratner and James Ratner, Trustees under the
Charles Ratner 1989 Irrevocable Trust Agreement and
Forest City Enterprises, Inc., insuring the life of
Charles Ratner, dated October 24, 1996, incorporated
by reference to Exhibit 10.29 to the Company's Form
10-K for the year ended January 31, 1997 (File No.
1-4372).
10.33 - Split Dollar Insurance Agreement and Assignment of
Life Insurance Policy as Collateral between Albert
B. Ratner and James Ratner, Trustees under the
Charles Ratner 1989 Irrevocable Trust Agreement and
Forest City Enterprises, Inc., insuring the life of
Charles Ratner, dated October 24, 1996, incorporated
by reference to Exhibit 10.30 to the Company's Form
10-K for the year ended January 31, 1997 (File No.
1-4372).
<PAGE> 33
Exhibit
Number Description of Document
------ -----------------------
10.34 - Split Dollar Insurance Agreement and Assignment of
Life Insurance Policy as Collateral between Albert
B. Ratner and James Ratner, Trustees under the
Charles Ratner 1989 Irrevocable Trust Agreement and
Forest City Enterprises, Inc., insuring the life of
Charles Ratner, dated October 24, 1996, incorporated
by reference to Exhibit 10.31 to the Company's Form
10-K for the year ended January 31, 1997 (File No.
1-4372).
10.35 - Letter Supplement to Split Dollar Insurance
Agreement and Assignment of Life Insurance Policy as
Collateral between James Ratner and Albert Ratner,
Trustees under the Charles Ratner 1992 Irrevocable
Trust Agreement and Forest City Enterprises, Inc.,
insuring the lives of Charles Ratner and Ilana
Ratner, effective November 2, 1996, incorporated by
reference to Exhibit 10.32 to the Company's Form
10-K for the year ended January 31, 1997 (File No.
1-4372).
10.36 - First Amendment to the 1994 Stock Option Plan dated
as of June 9, 1998, incorporated by reference to
Exhibit 4.7 to the Company's Registration Statement
on Form S-8 (Registration No. 333-61925).
10.37 - First Amendment to the forms of Incentive Stock
Option Agreement and Nonqualified Stock Option
Agreement, incorporated by reference to Exhibit 4.8
to the Company's Registration Statement on Form S-8
(Registration No.333-61925).
10.38 - Amended and Restated form of Stock Option Agreement,
effective as of July 16, 1998, incorporated by
reference to Exhibit 10.38 to the Company's Form
10-Q for the quarter ended October 31, 1998 (File
No. 1-4372).
10.39 - Third Amendment to Credit Agreement, dated as of
January 29, 1999, by and among Forest City Rental
Properties Corporation, the banks named therein,
KeyBank National Association, as administrative
agent, and National City Bank, as syndication agent
incorporation by reference to Exhibit 20.1 to the
Company's Form 8-K, dated January 29, 1999.
10.40 - Third Amendment to Guaranty of Payment of Debt,
dated as of January 29, 1999, by and among Forest
City Enterprises, Inc., the banks named therein,
KeyBank National Association, as administrative
agent, and National City Bank, as syndication agent,
incorporated by reference to Exhibit 20.2 to the
Company's Form 8-K, dated January 29, 1999. Exhibit
Number Description of Document
<PAGE> 34
Exhibit
Number Description of Document
------ -----------------------
10.41 - Subordination Agreement, dated as of January 29,
1999, by and among Forest City Enterprises, Inc.,
St. Paul Fire and Marine Insurance Company, St. Paul
Mercury Insurance Company, St. Paul Guardian
Insurance Company, Seaboard Surety Company, Economy
Fire & Casualty Company, Asset Guaranty Insurance
Company, KeyBank National Association, as
administrative agent, and National City Bank, as
syndication agent, incorporated by reference to
Exhibit 20.3 to the Company's Form 8-K, dated
January 29, 1999.
10.42 - Dividend Reinvestment and Stock Purchase Plan,
incorporated by reference to Exhibit 10.42 to the
Company's Form 10-K for the year ended January 31,
1999 (File No. 1-4372).
10.43 - Deferred Compensation Plan for Executives, effective
as of January 1, 1999, incorporated by reference to
Exhibit 10.43 to the Company's Form 10-K for the
year ended January 31, 1999 (File No. 1-4372).
10.44 - Deferred Compensation Plan for Nonemployee
Directors, effective as of January 1, 1999,
incorporated by reference to Exhibit 10.44 to the
Company's Form 10-K for the year ended January 31,
1999 (File No. 1-4372).
* 27 - Financial Data Schedules.
* - Filed herewith.
(b) Reports on Form 8-K:
On February 3, 1999, the Company filed Form 8-K (dated February
1, 1999) to submit a press release announcing the appointment of
Louis Stokes to the Company's Board of Directors.
On February 11, 1999, the Company filed Form 8-K (dated January
29, 1999) to submit the Third Amendments to the Credit Agreement
and Guaranty of Payment.
<PAGE> 35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FOREST CITY ENTERPRISES, INC.
(Registrant)
Date June 14, 1999 /s/ Thomas G. Smith
------------- --------------------------------------
Thomas G. Smith, Senior Vice President
and Chief Financial Officer
Date June 14, 1999 /s/ Linda M. Kane
------------- --------------------------------------
Linda M. Kane, Vice President,
Corporate Controller
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